Islamic banks eye green finance but adoption limited: report

By Bernardo Vizcaino

(Reuters) – Islamic banks are keen to develop sustainable practices into their businesses, but a lack of clarity on implementation means adoption of green finance remains limited, according to a report released on Friday.

The findings by the Responsible Finance & Investment (RFI) Foundation, a non-profit industry body, highlight an important challenge for Islamic finance as it looks to widen its appeal beyond its core markets in the Gulf and Southeast Asia.

Stronger links to socially responsible finance could help unlock new business opportunities and attract a wider pool of ethically minded investors from predominantly Western countries.

A survey of Islamic finance institutions conducted by the RFI over the past year found that three-quarters of respondents said they had considered implementing sustainable finance practices.

However, less than a third reported having in place policies on environmental sustainability and only a quarter had developed evaluation tools to measure their impact.

Some of the obstacles cited included a lack of clarity on how to implement such practices and uncertainty on whether these would be financially viable.

In addition, climate change, biodiversity and environmental sustainability have had relatively little attention given to them, the RFI said.

There has been some progress in areas such as financing small businesses and education, while Muslim-majority countries – Indonesia and Malaysia – have began incorporating green principles into their markets for Islamic bonds, or sukuk.

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